US timberland values positive after weak 2016 start

Appreciation returns were stronger in the US South, possibly on indications of an improved US housing market.

The National Council of Real Estate Investment Fiduciaries index returned 1.09 percent for Q2 2016, pushing returns into the black for the first half of 2016, after posting -0.26 percent in Q1.

Appreciation returns were strongest in the South, reaching 0.58 percent, in addition to 0.66 percent EBITDDA returns in Q2. The Northeast was the only region to see negative returns for the quarter, with EBITDDA returns of .33 percent outweighed by negative appreciation returns of 0.34 percent.

Positive performance in the South may be the result of a rebounding US housing market and of land values for the region catching up with gains previously seen in the rest of the country, said Sara Rutledge, director of research for NCREIF.

Investors have told Agri Investor that timberland values in the South tend to be more responsive to new housing than other regions, because it cannot reach the Asian like the Northwest.

At $2,456, the Northwest enjoys the highest value per acre of any timber region, despite falling by 8 percent in the last year. The Lake States had the lowest value per acre at $777, and also saw an 8 percent annual decline in values since the end of Q2 2015.

The Northeast and South saw market value per acre grow by 5.4 percent and 2.5 percent respectively.

The NCRIEF does not record all investment movement in the timberland industry. It may also not begin to track properties until they are commercially developed and see cash flow.

Source: NCREIF.

Source: NCREIF.